DWP unveils plans to allow pension transfers
Meeting Future Workplace Pension Challenges: Improving Transfers and Dealing with Small Pension Pots, a 37-page consultation paper released by the department for work and pensions, outlined plans to allow transfers of small pension pots between auto-enrolment schemes.
The move has been backed by Aviva which said in an official statement that this was its preferred model.
This transfers would involve a central clearing house matching an employee’s old auto-enrolment scheme with a new employer’s scheme. The standards applied on auto-enrolment schemes should mean that employees could transfer savings simply and safely.
The paper suggested alternative options, including improving the current voluntary system and establishing an aggregator scheme.
It also outlined plans to abolish short-service refunds for direct contribution occupational schemes.
Steve Webb MP, minister of state for pensions, said: “These rules jeopardise pension savings for low to median earners and will not be part of the auto-enrolment world.
“We expect this rule change to happen as soon as 2014, provided we are able to implement an accompanying solution for small pot transfers at the same time.”
Andrew Merricks, head of investments for East Sussex-based Skerritt Consultants, said: “I think it is a good idea to keep pots in the least confusing format possible.
“Bearing in mind there will not be a lot of difference between the funds offered in auto-enrolment, it is a good move to help people retain their pots in an understandable format with the minimum of fuss.”